VAT is being removed from household electricity bills – here's what it means for you
Updated on 30th October 2026
John Evans, Commercial Director, British Gas Energy
Latest update: October 2026
The government has announced that 0% VAT on household electricity bills will now continue until July 2027, extending the reduction beyond the original six-month period.
The government has extended the 0% VAT rate on household electricity bills until July 2027.
As part of Prime Minister Andy Burnham's pledge to help with the cost of living, the government cut VAT on household electricity bills from 5% to 0% for six months from 1st October 2026. In the Autumn budget, that's now been extended to July 2027. The extension is designed to give households extra breathing space, with the Prime Minister saying it will help "put more money in people's pockets".
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What does this mean for British Gas customers?
If you're a British Gas household electricity customer there's nothing you need to do. We automatically applied the VAT reduction to your electricity bills from 1st October 2026, and following the government's latest announcement, we'll continue to do so until July 2027.
Watch our short video for more about the VAT cut on energy and what it means for your bills.
How much could you save?
The amount you save will depend on how much electricity you use. Homes that use more electricity are likely to see a larger saving, while those that don't use as much may save a little less.
The government originally estimated that removing VAT from electricity bills could save a typical household around £45 a year.
We're here to help
We know that many people are still feeling the pressure of rising energy costs, and while this VAT reduction is welcome news, it may only be one part of the picture.
If you're finding it difficult to pay your energy bills, support is available. Just speak with your energy supplier for help to manage your payments. The British Gas Energy Trust also offers grants and practical advice to people who need it most. You don’t have to be a British Gas customer to apply.
Chris O'Shea, Group Chief Executive of Centrica, said:
It's encouraging to see the new Prime Minister move quickly to help households with the cost of energy. Any reduction in bills will be welcome news for customers and it's good to see affordability being made a priority from day one. We will, of course, be passing this reduction on to our customers.
We've been clear for a long time that help should be targeted at those who most need it. We continue to believe that the most sustainable solution would be a targeted social tariff to support vulnerable households, and we look forward to helping the government deliver that at the earliest possible opportunity.
Looking for more ways to save on your energy bills?
The VAT cut is one way your electricity bill could come down, but it's not the only one.
Choosing a tariff that suits the way you use energy could help you get even more value from your electricity. Whether that's the reassurance of a fixed tariff or the flexibility of a smart tariff, we're here to help you find the right option for your home.
Explore our range of British Gas energy tariffs and discover more ways to make the most of your energy.
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